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AEP Industries Inc. Reports Operating Results (10-Q)

September 09, 2010 | About:
10qk

10qk

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AEP Industries Inc. (AEPI) filed Quarterly Report for the period ended 2010-07-31.

Aep Industries Inc. has a market cap of $163.7 million; its shares were traded at around $23.88 with a P/E ratio of 4.1 and P/S ratio of 0.2. Aep Industries Inc. had an annual average earning growth of 6.3% over the past 10 years.AEPI is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Net sales for the third quarter of fiscal 2010 increased $15.2 million, or 8%, to $204.9 million from $189.7 million for the third quarter of fiscal 2009. The increase was the result of a 15% increase in average selling prices attributable to higher resin costs during the comparable periods, positively affecting net sales by $28.9 million, offset by a 7% decrease in sales volume negatively affecting net sales by $15.4 million. We continued to experience the adverse effects of the economic recession causing total volume to be below managements expectations. The third quarter of fiscal 2010 also included a $1.7 million positive impact of foreign exchange relating to our Canadian operations.

volumes sold and lower plant utilization during the period. There was an $11.1 million decrease in the LIFO reserve during the third quarter of fiscal 2010 due to decreasing resin costs during May through July 2010, versus a $5.0 million increase in the LIFO reserve during the third quarter of fiscal 2009, for an aggregate decrease of $16.1 million year-over-year. Gross profit adjusted for LIFO reserve fluctuations reflect the negative impact on the business of rapidly changing resin costs and margin compression resulting from extremely competitive market conditions. The third quarter of fiscal 2010 also included $0.4 million of positive impact of foreign exchange relating to our Canadian operations and a $0.3 million decrease in share-based compensation.

Operating expenses for the third quarter of fiscal 2010 decreased $2.5 million, or 9.6%, to $23.7 million from the comparable period in the prior fiscal year. The decrease in operating expenses is primarily due to decreased volumes sold in the current period decreasing delivery and selling expenses by $1.4 million and a decrease of $1.2 million related to share-based compensation costs associated with our stock options and performance units, partially offset by an increase in fuel costs. The third quarter of fiscal 2010 also includes a $0.2 million unfavorable effect of foreign exchange increasing reported total operating expenses.

Net sales for the nine months ended July 31, 2010 increased $25.2 million, or 5%, to $577.7 million from $552.5 million in the same period of the prior fiscal year. The increase was the result of a 5% increase in average selling prices attributable to higher resin cost during the comparable periods, positively affecting net sales by $26.1 million, partially offset by a 1% decrease in sales volume negatively affecting net sales by $7.5 million. The first nine months of fiscal 2010 also included a $6.6 million positive impact of foreign exchange relating to our Canadian operations.

Gross profit for the first nine months of fiscal 2010 decreased $49.7 million to $77.5 million from $127.2 million in the same period of the prior fiscal year. There was a $6.2 million increase in the LIFO reserve during the first nine months of fiscal 2010 versus a $21.3 million decrease in the LIFO reserve during the first nine months of fiscal 2009, for an aggregate increase of $27.5 million year-over-year. Excluding the effects of the LIFO reserve increase, gross profit decreased $22.2 million primarily due to a lag in selling price increases during the period and lower plant utilization. The first nine months of fiscal 2010 also included $0.9 million of consulting costs associated with the implementation of our new operating system and $1.2 million of positive impact of foreign exchange relating to our Canadian operations.

Operating expenses for the first nine months of fiscal 2010 decreased $3.2 million, or 4.4%, to $70.6 million from the comparable period in the prior fiscal year. The decrease in operating expenses is primarily due to cost cutting initiatives implemented during fiscal 2009 reducing operating expenses, combined with decreased volumes sold in the current period decreasing selling and delivery expenses by $0.7 million and a decrease of $1.3 million related to share-based compensation costs associated with our stock options and performance units, partially offset by $0.7 million of consulting costs associated with the implementation of our new operating system and an increase in fuel costs. The first nine months of fiscal 2010 also includes $0.8 million unfavorable effect of foreign exchange increasing reported total operating expenses. The first nine months of fiscal 2009 included approximately $0.8 million related to transitional services associated with the Atlantis acquisition.

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